WONG KAR GEE MIMI v. HOGAN LOVELLS

HCMP1841/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1841 OF 2011

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J U D G M E N T

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I. INTRODUCTION

1.  By originating summons dated 21 September 2011, Madam Wong Kar Gee Mimi (“the Plaintiff”) sought an order for taxation under the Legal Practitioners Ordinance (Cap. 159) and Order 106 of the Rules of the High Court of all 10 bills of fees, charges and disbursements delivered to her by the Messrs. Hogan Lovells, her former solicitors (“the Defendant”).  The bills rendered were for the period from 20 July 2010 to 28 March 2011.

2.  The Plaintiff divorced her husband, Hung Kin Sang (“Mr. Hung”) in 1999. The decree absolute was granted in March 2010.  By all accounts, it was an acrimonious parting.

3.  Sometime prior to the engagement of the Defendant, the Plaintiff was at all material times a shareholder and director of Applied Development Holdings Ltd (“ADHL”), a Hong Kong listed company founded by her and Mr. Hung.  Both were substantial shareholders and directors of ADHL.

4.  During the divorce proceedings, each of them had leveled serious allegations of impropriety against the other on matters relating to ADHL. Being genuinely concerned and fearful that Mr. Hung was wrongfully maneuvering to strip her of her rights and entitlements as a director and shareholder of ADHL, Messrs Hampton Winter and Glynn her then solicitors seized of her ancillary relief application in the divorce proceedings, referred her to Christopher John Dobby, a partner in the Defendant (“Mr. Dobby”) for advice addressing her concerns on corporate issues.  The Plaintiff met Mr. Dobby for the first time on 15 June 2010.  3 days later, the Plaintiff attended the Defendant’s office the 2^nd time and signed the Engagement Letter (“the retainer”) formally engaging the Defendant as her corporate lawyers.

5.  In the course of acting for the Plaintiff, the Defendant issued 10 bills, 7 of which the Plaintiff fully settled without demur or raising any query or issue as to quantum or the number of lawyers involved on her behalf within about a fortnight of their delivery.  The last 3 bills, namely, 8, 9 and 10 in the aggregate sum of HK$1,809,925.57 remain outstanding.  At the Plaintiff’s insistence, the Defendant agreed to discount bill no. 8.

6.  It is the Plaintiff’s case that all 10 bills being interim bills should be construed as a single bill and taxation should be mandated given the lack of information on costing issues, failure to communicate adequately with her and the redolence of overcharging evident on the bills themselves.  It was contended by the Plaintiff, inter alia, that the Plaintiff’s on-going skirmishes with Mr. Hung and ADHL continued through the delivery of the last bill and the interim bills at best represented partial payments of one single final bill to be delivered when the Defendant’s engagement ended.  Even if the Defendant was entitled to deliver interim bills, the 7 settled bills ought to be construed as part of the final account which the Defendant would be entitled to deliver.

II. The Retainer

7.  It is patent from the retainer under “Scope Of Instructions” that Mr. Dobby and the specialist corporate team within the Defendant working under his liaison were engaged by the Plaintiff to advise on her dispute with Mr. Hung and in respect of investigations relating to ADHL.  It can accordingly be seen that the Defendant was not instructed to represent her on a single piece of litigation but to advise on a range of matters and issues.

8.  Mr. Dobby was to and did have overall conduct of the matter with an assistant solicitor, Susan Yiu assisting him (“Miss Yiu”).  Under the express terms of the retainer, Mr. Dobby was entitled to involve others of the Defendant’s lawyers with specialist skills where appropriate.  He was to arrange internal co-ordination and consistency of approach.

9.  As for the basis of charging, the retainer expressly stipulated that:

“We shall calculate our fees only by reference to the time spent…

   Our current rate for partners is HK$6,400 an hour and other qualified lawyers are charged at rates between HK$3,700 and HK$5,200 an hour based on their seniority.  Work done by trainee solicitors and researchers is charged at HK$2,450 an hour.”

10.  Billing was in these terms:

“ Invoices will be submitted monthly.

   Our invoices represent charges for the work we have done, and include disbursements and other expenses incurred, during the period covered by the invoice…”

11.  Payment terms were specified as:

“9. Our invoices are due for payment within 14 days of the invoice date. If possible please pay them by bank transfer. Bank details appear on our invoices.

10. If an invoice remains unpaid for more than one month, or if you fail within two weeks to meet a request for payment on account of costs or disbursements (or both), we may decline to act any further. In that case, we shall charge you for the full amount of work done to that date.

   We may charge interest on accounts which are overdue for more than one month.  Interest is calculated at an annual rate equal to the rate for the time being applied to judgment debts.”

12.  Pursuant to the retainer, the Defendant issued monthly invoices to the Plaintiff between 20 July 2010 and 28 March 2011.

13.  The Plaintiff must have been aware of the terms of the retainer particularly the terms referred to above when she signed it.  As an educated person conversant with corporate affairs and totally at ease in the English language, with her past and continuing experience of instructing solicitors and counsel on a number of occasions, she cannot but have been aware of the full terms and effect of the retainer in question.

14.  The Defendant was contractually entitled to render separate monthly bills for settlement and expect to be paid within 14 days failing which interest would be chargeable.  The narratives of the bills would have furnished details of the work done and by whom and of the disbursements incurred on the Plaintiff’s behalf.

15.  The retainer clearly envisaged the use of other lawyers of the Defendant other than Mr. Dobby and Miss Yiu where necessary or appropriate.  The Plaintiff was made so aware and had agreed to such division of labour when affixing her signature on the retainer.  Even a cursory glance of the narratives of the bills she paid would have indicated the involvement of other lawyers.

16.  The Plaintiff said Mr. Dobby had expressed on a number of occasions that the Defendant would be reluctant to instruct counsel on her behalf without payments on account.  Accordingly, “much of the payments that I had made were of this nature, that is, advance deposits for counsel’s fees”.  However, that simply does not accord with the details of the costs and disbursement thus far paid by her.

III. Were the 10 bills separate bills or bills constituting a series of bills?

17.  Determination of this issue requires two questions to be affirmatively answered. The first question posed is whether the Defendant has the power to deliver each of the bills as a final bill (a mixed question of law and fact) and the second question, whether the individual bills delivered to the Plaintiff were delivered as separate final bills: Chin Yuk Lun & anr v Messrs Lo & Lo [2006] HKEC 1249.

18.  As respect the first question, Deputy Judge A To (as he then was) in Chin Yuk Lun, supra, observed (at para. 10):

“ the approach nowadays is to look first at the retainer to see if the solicitor has the contractual right under the retainer to issue separate bills prior to conclusion of the matter for which he was retained.”

19.  The retainer in question clearly and unambiguously conferred the right to issue and deliver monthly invoices to the Plaintiff by the Defendant prior to conclusion of the on-going disputes between the Plaintiff and Mr. Hung.  As previously stated, the Defendant had not been engaged upon a single identifiable piece of litigation.  They were retained to advise on corporate matters and the disputes extant between the Plaintiff and Mr. Hung.

20.  As to the second question whether the bills were issued as separate final bills, an issue of fact, the learned Deputy Judge went on to state (at para. 18):

“ There are two elements here. The solicitor has to deliver the bill intending it to be a final bill and it is also intended and understood by the client to be a final bill. This question has to be answered by looking at the intention of the solicitor and the client, their conduct, the reaction of the client upon receipt of the bill and the form the bill took.”

21.  On the matter of finality of a bill, the learned Deputy Judge, adopting the approach of Cohen J in De Cotiis v Owen Bird [1998] 51 BCLR (3d) 272 further stated (at para. 12):

“ Thus, in my view, “final” in the context of a solicitor’s bill of costs does not mean “last”. It means finality, i.e. it will not be changed and it implies self-containment. It is final in respect of a certain stage defined in the retainer, whether by event or by time.”

22.  In the circumstances of the case, the 10 bills were issued and intended as self-contained final bills on a monthly basis which the Defendant was plainly entitled to do and agreed to and accepted by the Plaintiff as such.  Of significance too was the fact that bills 1 to 7 were all paid within 14 days without question or complaint by the Plaintiff.

23.  On a true construction of the retainer, the Plaintiff’s contention that the 10 bills constitute but one single bill is wholly unsustainable on the evidence.  This primary position having failed, it is necessary to examine the individual 10 bills.

IV.Applicable Principles

24.  Section 67 of the Legal Practitioners Ordinance (Cap. 159) (“ the LPO”) under which the application for taxation of all 10 bills is brought provides:

“ (1) On the application, made within 1 month of the delivery of a solicitor’s bill or a foreign lawyer’s bill, of the party chargeable therewith the Court shall, without requiring any sum to be paid into court, order that the bill shall be taxed and that no action shall be commenced thereon until the taxation is completed.

(2) If no such application is made within the period mentioned in subsection (1), then, on the application of the solicitor or the foreign lawyer or of the party chargeable with the bill, the Court may, upon such terms, if any, as it thinks fit (not being terms as to the costs of the taxation), order –

(a) that the bill shall be taxed;

(b) that, until the taxation is completed, no action shall be commenced on the bill, and any action already commenced be stayed:

Provided that –

(i) If 12 months have expired from the delivery of the bill, or if the bill has been paid, or if a verdict has been obtained or a writ of inquiry executed in an action for the recovery of the costs covered thereby, no order shall be made on the application of the party chargeable with the bill except in special circumstances and, if an order is made, it may contain such terms as regards the costs of the taxation as the Court may think fit;

(ii) If the bill has been paid no order under this subsection shall be made where the application for the order is made after the expiration of 12 months from the date of payment of the bill.”

25.  There is consensus on the authority of Re Miller Peart [2007] 3 HKLRD 125, followed in Re KC Ho & Fong [2007] HKEC 1687 that Sections 67(1) and (2) of the LPO have created three regimes:

First Regime

   Where the application for taxation of bills is made within one month since delivery of the solicitor’s bill, the client may apply to have the bill taxed as of right, and no term or condition will be imposed: section 67(1) of the LPO.

Second Regime

   If the client fails to apply for taxation within one month since the delivery of the bill, either the solicitor or the client my apply for taxation and the court may so order and impose any terms as it may think fit except terms as to the costs of the taxation: section67(2) of the LPO.

Third Regime

   If twelve months or more have elapsed since the delivery of the bill or if the bill has been paid, the client must demonstrate special circumstances to justify his application for taxation and the court may impose any terms including terms as to the costs of the taxation: section 67(2)(b)(i) of the LPO.

26.  The first 3 bills were all delivered and settled more than 12 months before the issue of the Plaintiff’s summons.  That being so, they fall squarely within the ambit of section 67(2)(b)(ii) of the LPO.  I agree that no order for taxation is permissible with regard to them.

27.  As regards bills 4, 5, 6 and 7 that have also been paid, special circumstances under the Third Regime must be raised before an order for their taxation can be considered.

28.  What constitutes special circumstances would necessarily depend upon the facts of each case.  It is a stringent test requiring cogent evidence: South Horizons International Petroleum Ltd v Crump & Co [2002] 2 HKLRD 187. There must be something that is out of the ordinary, serious and which justifies not only an ordinary taxation but a special one.  Factors constituting special circumstances may turn on evidence of overcharging, lack of particularity in the bill and whether an applicant has expressly reserved his right to taxation, a factor of considerable importance: per Godfrey JA in Springbok Shipping (HK) Ltd & ors v Clayton Wong & Co [1998] 1 HKLRD 225. Pressure brought to bear to settle a bill, the overall nature of the services rendered, the nature of the bills and whether adequate explanations have been given for the amounts are also to be considered in this context: Ruth Yoeh Yu Wang v Victoria Chan HCMP  71/1988.  A very large bill, gross blunder and extraordinary charge too may tantamount to special circumstances: In Re Norman (1885) L.R. 16 QBD 673.

29.  Has the Plaintiff made out a case for a special taxation by dint of special circumstances?  On the evidence having heard both Mr. Dobby and the Plaintiff testify, I am satisfied to find that the Plaintiff has singularly failed to discharge this burden of proof.

30.  There was no evidence of overcharging in any of the 10 bills albeit in present context, one is concerned only with bills nos. 4 through 7.  Each of those bills contained a detailed narrative of the work undertaken on her behalf with her approval and knowledge.  Each was fully particularized.  The various and many fee-earners involved at different stages on different aspects of the work done were clearly identified and their separate involvement and contribution described in the bills.

31.  The Plaintiff testified that she was taken aback by billings for 25 separate fee-earners from partners to translator.  She said somewhat vaguely that she was unaware that so many individuals were to be involved on her case. That cannot be right as she knew that the retainer that she approved and signed stipulated under “Conduct Of Work”:

“ I (Mr. Dobby) am the partner with overall conduct of the matter. Susan Yiu, an assistant solicitor will assist me.

I shall involve other of our lawyers with specialist skills if appropriate. I shall arrange internal co-ordination and consistency of approach.

As far as possible we shall not change the personnel involved. I shall tell you of any necessary changes.” (parenthesis supplied)

32.  To achieve costs effectiveness and to ensure that the necessary skills were employed, Mr. Dobby explained in the witness-box that appropriate members of the Defendant were brought in as and when justified.  Where he lacked specialist knowledge and skill for a particular piece of work, the matter was tasked to someone else with the requisite expertise.  Where the work did not justifiably require his attention and could be done satisfactorily by trainees under supervision at lower cost, it was accordingly delegated.  From the table he produced of the total number of hours billed, he and Miss Yiu accounted for the lion share with less than 200 hours attributed to other fee-earners.

33.  The Plaintiff knew she was entitled to have the bills taxed were she to be dissatisfied with the billing and to raise her concern with the Defendant under the terms of the retainer.  This she did not do.  She simply settled the bills in question.  When giving evidence, she explained that she was not the sort of person to cause problems or to rock the boat as the Defendant was then acting for her.  Hence her reticence.  That she was unhappy with the lack of progress in her case cannot be doubted.  She poignantly stated that her position was no better vis a vis Mr. Hung and ADHL after engagement of the Defendant.  Her frustration was obvious but it does not warrant an order for taxation.

34.  In sum, no special circumstances have been shown on the evidence to justify an order to tax the aforementioned bills.

V. Bill 8

35.  This bill remains outstanding as also the two remaining bills issued subsequently.

36.  On 1 March 2011, the Plaintiff emailed Mr. Dobby insisting that the bill be adjusted down by HK$300,000 being HK$100,000 and HK$200,000 for counsel and the Defendant respectively.  Mr. Dobby responded with a counter-offer of HK$200,000 on the same day.  This was rejected. By email dated 7 March 2011, the Plaintiff maintained her insistence of seeking an overall reduction of the bill by HK$300,000.

37.  An email from Mr. Dobby followed on 30 March 2011 stating:

“ … I do value our relationship with you and I do wish to see this matter resolved as soon as possible so that we can focus on the real issues in the litigation. On this basis and in order to resolve this issue with you without any further delay, I am prepared to accept your proposed HK$300,000 reduction from my invoice number 30104669 on the basis that you agree that the balance of the invoice in the sum of HK$924,067.35 will be paid within the next 14 days (failing which this offer will lapse). I trust the above proposal meets with your approval and would be obliged for your confirmation.

   Again, I must stress, that this is a one off deduction which applies to this invoice only and will not affect or apply to any of our other fees, costs and expenses.”

38.  There is a concluded binding agreement to settle bill 8 and no taxation should be ordered for this reason alone.

VI. Bills 9 and 10

39.  Section 67(2) of the LPO would have to be considered as both unpaid bills were delivered less than 12 months prior to the date of these proceedings commenced over 1 month after their issuance.  The discretion to order taxation may be on stringent terms: Clyde & Co (a firm) v Maranta Enterprises Ltd, HCA 752/2002.  Although the arguments (directed principally at bills 4 through 7 but generally applicable to all bills) urging special circumstances have been considered and rejected, the court should lean in favor of ordering taxation of these two outstanding bills in the circumstances of the case.

40.  In my judgment, there shall be an order for taxation of bills 9 and 10 upon payment of the full amount of the bills into court within one month hereof.

VII. COSTS

41.  The Defendant having been largely successful in resisting the Plaintiff’s application shall have its costs of the application including all costs reserved in respect thereof, taxed if not agreed, on party and party basis.  This order shall be nisi in the first instance with liberty to apply within 14 days hereof.